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The
following independent asset evaluation on Canadian Hydro plants
was based on data from December 31, 2007 and, as such, is an historical
document that may no longer be relevant due to changes in facts.
Readers are cautioned against relying on this information.
It is Canadian Hydro's policy to have this independent asset evaluation
updated on an annual basis. |
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Independent Asset Evaluation of Canadian Hydro Plants
McDaniel & Associates Consultants Ltd., a highly respected independent
firm of engineers, has evaluated each CHD plant as of January 1,
2008. The purpose of engaging McDaniel & Associates, it
is
to provide investors and shareholders with third party confirmation
of future cash flow estimates.
Values have been computed assuming an 8% discount factor on
future cash flows of the Company's 20 generating plants, projects under construction
and
certain development prospects. Revenues can be predicted with some degree of reliability since
we have, to varying degrees, sold forward over 75% of our output under long-term sales contracts.
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Discounted Cash
Flow, Net of Operating Expenses
(Pre-Tax): |
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8% Discount |
|
(in $
millions) |
| McDaniel & Associates evaluation(1) |
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| Operating plants and projects
under or nearing construction (2) |
1,217.3 |
| Development prospects(3) |
222.7 |
| Total asset value, operating plants,
projects under or nearing construction and development
prospect, before income tax |
1,440.0 |
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(1)
The following assumptions were used by McDaniel & Associates
in preparing its evaluation: (1) electricity prices were
determined using either a contractually-determined price
specific to each plant or a forecast of the average
electricity spot price specific to each of the three
provinces in which the Company operates where no contracts
are in place or expire; (2) the forecast of the average
electricity spot price was based on McDaniel & Associates
opinion on future natural gas and electricity prices at
January 1, 2008; (3) electricity generation from each
operating plant was primarily based on historical annual
averages. For plants without sufficient operating history,
generation was based on data we provided, which,
in turn, was derived from independent studies; (4) we
provided estimates
of applicable operating costs, which were primarily based on
historical annual average costs; (5) we provided estimates of sustaining
capital were based either on historical annual average costs
or estimates provided by independent studies; (6) overriding royalties,
water rentals, property taxes and lease rentals were
estimated based on the applicable contracted or legislated
rates; (7) we provided capital costs related to projects either under
construction, nearing construction or under development; (8) applicable electricity
prices, operating costs, sustaining capital, water rentals
and property taxes were escalated at 2% per annum, unless
otherwise prescribed by contract or legislation; and (9)
discounted cash flows for plants, projects and prospects
assume no terminal value.
(2)
Includes the Melancthon II, Wolfe Island, Royal Road and Le
Nordais Expansion Wind Projects,
and the Island Falls, Bone Creek, Clemina Creek, Serpentine
Creed and English Creek Hydroelectric Projects that
are currently under construction or slated for construction
commencing between 2008 and 2010.
(3)
We have a significant growth plan beyond this pipeline of
1,462 MW, which have not been included in this evaluation.
No value has been attributed to other prospects, namely:
British Columbia
Hydroelectric Prospects and Manitoba, Alberta and Ontario
Wind Prospects
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These
materials may contain forward looking statements based on current
expectations,
but which involve risks and uncertainties. Actual results
may differ.
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